CCI's WhatsApp order revives question on regulatory turf

The competition watchdog imposed a ₹213 crore penalty on Meta for allegedly abusing its dominant position and prohibited WhatsApp from sharing user data collected on its platform with other Meta companies or products for advertising purposes for five years. The order, however, is in conflict with the Digital Personal Data Protection Act of 2023 and the draft rules to implement the law released by the ministry of electronics and information technology (Meity) on 3 January. The rules allow processing of digital personal data of individuals with informed consent, the persons said, requesting anonymity. The new law entrusts the Data Protection Board of India -- to be set up by the government--with overseeing legitimate use of personal data based on consent.

“CCI’s order on Meta Platforms prohibiting data sharing by WhatsApp for five years signals CCI’s role as a guardian of personal data. It goes against the individual’s sovereignty over data and small and medium businesses' ability to go for targeted advertising on the basis of such data," the person cited above said.

Meta’s appeal against the CCI order is currently pending in the National Company Law Appellate Tribunal.

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As per the CCI order, the company has time till mid-February—three months from the date of order--to comply with its directions on specific data-related practices. Stopping data sharing among group entities could impact Facebook’s advertisement business and small businesses' ability to target advertisements, the second person said.

Experts pointed out that while the CCI order prohibiting user data sharing by Meta among group entities for five years shows the regulatory effort to protect competition in the market, the emerging digital data protection framework allows it based on user consent.

“The entire edifice of protecting digital data and its legitimate use is based on user consent and user autonomy, given that the user may consider it beneficial," said Amol Kulkarni, director of research at CUTS International, a non-profit, non-governmental organization working on public interest issues.

“Regulatory bodies like CCI may have a concern about the use of data by businesses, but whether the remedy for that can be a complete prohibition, even when the user is agreeing to it, is a questionable premise because it could have an unintentional impact on user interest. While we completely understand CCI may be looking for innovative remedies against anti-competitive conduct, where penalty alone may not prove to be a disincentive, prohibiting data sharing even when the user is actively consenting can impact interests of small businesses given that startups and other small businesses would potentially benefit from data sharing and targeting advertisements," said Kulkarni.

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“That is the way they can compete with larger companies and connect with customers. We appreciate CCI’s concerns, but we need to be very careful in order to avoid any unintentional impact," Kulkarni added.

Queries emailed on Friday to CCI and Meta seeking comments remained unanswered.

In 2018, the Supreme Court had offered guidance on the interplay of the powers of CCI and Telecom Regulatory Authority of India (Trai) in a case of alleged cartelization in the telecom sector. The apex court had said that comity between the sectoral regulator and the anti-trust regulator is a crucial aspect of market regulation and must be exercised effectively. The court balanced regulatory powers by giving Trai the authority to determine sector-specific issues first, and invoke the jurisdiction of CCI if it apprehends existence of anti-competitive practices.

The CCI order accused Meta of abusing its dominant position, citing WhatsApp’s 2021 privacy policy update which it said undermined users’ ability to opt out of getting their data shared with the group’s social media platform Facebook. Business transaction information of users helps social media firms profile customers and target advertisements. According to a clarification from WhatsApp in 2021, the policy update did not affect the privacy of customer messages with friends or family in any way.

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The CCI order said that sharing user data among Meta companies for purposes other than offering WhatsApp services creates an entry barrier for the rivals of Meta, and results in denial of market access in the display advertisement market, in violation of competition law. Meta’s leveraging of its dominant position in the internet messaging app to protect its position in the online display advertising market was against the law, the regulator said.

MeITy's draft rules on digital data protection, open for public feedback till 18 February, says consent given by the user should be free, specific, informed, unconditional and unambiguous and for a specified purpose. The Digital Data Protection law seeks to allow processing of digital personal data based on individuals’ right to protect the same and the need for its lawful uses.

Facebook acquired WhatsApp in 2014.

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